Maximum High Return Potential

The term non-correlated asset classes covers a whole range of potential investments, including venture capital, real estate, private equity, and commodities, but also alternative investment strategies.
But in today's economy of crashing public equity markets, defaulting hedge funds, and non-existent real estate plays, investing in film slates, including theatrical distribution, offers a high yield alternative investment that can be leveraged with tax benefits and multiple sources of revenues including theatrical, DVD, Video on Demand, cable, and the foreign markets.

As a non correlated asset class, films and film finance have outperformed every non-correlated asset class in the world.  Looking at over $6 billion dollars poured into motion picture finance deals in the last 3 years, the IRR across the spectrum for both studios and independents are resilient amdist global economic declines in other industries.

Non-correlated investment strategies can be used by investors to neutralize, or counterbalance, the risk that one, or more, of the investments in a traditional portfolio of stocks and bonds falls in value. In order to do this, investors typically place between 5% and 20% of their total investment portfolio into alternative investments to protect the remainder of the portfolio from downside risk.

Amongst the spectrum of asset classes targeted by high net-worth individuals, institutional investors, pension funds or private banks, alternative investments are becoming popular, offering more diversification to investors' portfolios. The benefits of such diversification have been demonstrated by Harry Max Markowitz ( 1990, Nobel Prize in Economics ) in the Modern Portfolio Theory. He proved mathematically that an investor can reduce portfolios' risks simply by holding instruments which are not perfectly correlated - a correlation coefficient not equal to one. By holding a diversified portfolio, investors should be able to reduce their exposure to individual asset risk.

If investors are attracted by alternative investments in their quest for alpha, it is because allocating to alternative investments offers advantages compared with traditional asset classes and diversification to a portfolio, though involving a certain level of risk.

As investors have become more concerned about their risk-adjusted returns, especially in bearish market environments, interest in alternative investment strategies has gained momentum.

By investing in alternative investments, a portfolio manager or a given investor aims at obtaining performance from the relationships between securities. A non-correlated asset class behaves independently from other securities composing a portfolio. Such investment vehicles allow investors to hedge the risk that an asset falls in value and avoid any snowball effects. One of the main benefits of alternative investment strategies lies in the fact they minimize downside risk.

When educated about properly structuring leveraged film finance, which may also include U.S. and international tax incentives to minimize the risk, many private bankers, sovereign wealth funds, high net worth investors, family offices, and pension plans understand that they are not gambling on one film hoping to win a film festival. When a company is looking to finance 10, 20, 40,50, or 75 films there is more than just upside on revenues from each one but a final exit strategy after 5-7 years that can bring 300-400% returns on capital invested.

Film, Entertainment, Media, and Hollywood in general seem to be thriving and immune from economic woes. If you look at the theatrical box office receipts and DVD growth of recent films, including "Paranormal Activity"' or "Twilight" which initially had zero movie stars, the ROI on these and numerous other films exceed the ROI and revenues of auto manufacturers, real estate, stocks, mutual funds, etc. Primarily because a well made film is not a local commodity that is just bought and sold once but a global one that has revenue potential from more than 100 countries and mediums including theatrical, cable, tv, satellite, airline, DVD, and the huge explosion of Video on Demand.

While some private equity outfits may balk at the notion that Hollywood is safe, this country was built on blue chip industries, and for the retail investors, Wall Street and Real Estate was the path. When retail investors as well as institutional investors are transitioning from brick and mortar investments to the film business, the underlying question is 'why'?"

Some U.S. investors and C corporations are looking for either a strict 100% deduction of their investment under IRS Section 181 or simply being in a portfolio of non-correlated investment opportunities. Overseas investors simply want a high yield non-correlated asset class that has long term appreciation such as our hybrid film slate offers.

And for smaller retail investors, not including affluent families or ultra high net worth investors, the bridge between film finance, film production, distribution, and technology are converging so that investors see their investment bring an immediate return from the monetization of state tax credits as part of the equity stream,  an upside to investing ina number of films vs. investing in a single picture, possible Section 181 benefits, as well as  the creation of jobs and stimulation of the economy since every film production creates 50-100 jobs.

While many retail and other entertainment sectors in a down economy have real world effects, the answer is clearly seen when a family that may have been used to expensive steak dinners or other outings substitutes this with a $10.00 movie that can be watched in theaters, ordered as Pay Per View on Cable, or downloaded from the Internet.